Monthly Archives: December 2015

One of the most important lessons from the 2013 Target breach was that hackers will look for the weakest link in a company’s security chain when seeking a point of entry. Often, that weakest link is the vendors and partners which integrate with your IT infrastructure or have login credentials to your systems. Target’s HVAC vendor suffered a phishing attack that resulted in hackers obtaining access credentials to Target’s network which they used as their point of entry. Companies are increasingly doing security diligence on their vendors and partners to ensure that if they have access to the company’s network or systems, they will meet minimum security requirements. It’s critical that your vendors and partners agree to minimum contractual security commitments as well. I often use a “security addendum” with controlling language to ensure that my standard provisions control over any conflicting provisions in the vendor/partner agreement, but will sometimes embed them directly into the contract.

Here are some of the provisions I like to include in vendor and partner agreements:

Definitions of Personal Information and Financial Account Information. It’s important to define what “personal information” and “financial account information” mean. In many cases, your vendor/partner’s definition of these terms may differ from yours. Ensuring you’re on the same page (e.g., you may consider IP addresses to be personal information, they do not) can be critical in the event there is an unauthorized release of information. Be careful using a list of information types as the list may change over time; instead, consider a broad definition with examples.

Credentials. If you are providing credentials to your vendor/partner to access your network or systems, or that of a third party (e.g., a marketing service, a cloud hosting environment, etc.), ensure they will only use them as required by the contract. Ensure they fall under the contractual definition of Confidential Information and will be treated as such. Access to credentials should be limited to those with a “need to know.”

Safeguards. I like to include a requirement to implement and follow administrative, physical and technical safeguards (no less rigorous than industry standard) designed to protect information and credentials. This can be a good catch-all that can be leveraged if the vendor/partner has a problem later on and did not use industry standard security safeguards. I also like to call out the importance of installing security software patches immediately to reduce the risk of an exploitable security hole. If the vendor/partner has obtained security certifications (e.g., SSAE16, ISO 27001, etc.) that you are relying on, ensure they provide evidence of current certification upon request and do not let certifications lapse during the term of the Agreement.

Payment Account Information. If the vendor/partner will not be handling payment account information, add an affirmative obligation that the vendor/partner will not access, use, store, or process payment account information. If you are afraid that information might be inadvertently provided to the vendor/partner, consider adding a provision stating that if any payment account information is inadvertently provided to the vendor/partner, as long as they destroy it immediately and notify your company the vendor/partner will not be in breach of the affirmative obligation not to use payment account information. If your vendor/partner will handle payment account information, ensure you have appropriate language that covers both current and future PCI-DSS (Payment Card Industry Data Security Standard) versions. If appropriate, add language making clear that payment account information will be stored in active memory only, and not stored or retained on the vendor/partner’s servers (e.g., where the payment information is “tokenized” and/or securely transmitted to your company’s own servers at the time the transaction is processed).

Information Security Questionnaire. Include the right to have the vendor/partner complete a written security questionnaire once a year signed by a corporate officer. Requiring an annual questionnaire can help identify whether your vendors/partners are on top of emerging threats and risks. If you have limited resources to conduct audits, the responses to the questionnaires can help you identify which vendors/partners may be best to audit. As part of the questionnaire, ask for copies of the vendor/partner’s disaster recovery plan and business continuity plan, and certificate of insurance for the vendor/partner’s cyber security policy if your company is named as an additional insured.

Audit Rights. Include a right to do a security audit of a vendor/partner’s information technology and information security controls. This should include the right to conduct penetration testing of the vendor/partner’s network, ideally on an unannounced basis. Make sure the vendor/partner is obligated to correct any security discrepancies found at their expense; if they don’t make corrections to your reasonable satisfaction, you should be able to exit the contract. Ensure you can use internal and third party resources to conduct the training. In addition to a right to audit on a regular basis (e.g., once per year), allow the right to audit after a security breach so you can do your own analysis of how well the vendor/partner has bulletproofed their systems in light of a breach.

Security Breach. Define what a “security breach” is (consider a broad definition that includes security incidents as well). Ensure the vendor/partner promptly notifies your company in the event of a security breach, ideally by email to a “role” mailbox or to your CIO/CTO. The vendor/partner should take any triage steps necessary to close the immediate security hole and then thoroughly review and bulletproof its systems and networks. The vendor/partner should agree to work with your company and any government entities in any investigation of the breach. Ensure that your company, not the vendor/partner, decides whether and how to communicate with affected individuals. Ensure the vendor/partner bears the costs associated with a security breach.

Preservation Notices and E-Discovery. If the records of the vendor/partner may be important if litigation is brought against your company, consider adding a clause ensuring that the vendor/partner will comply with any document preservation/litigation hold notice you provide, and that the vendor/partner will reasonably assist with electronic discovery requests. A “friendly” clause like this can help avoid issues and strain on the partnership if litigation occurs.

Once you have these provisions in your agreement, don’t forget to tie them into your risk allocation provisions. If the vendor/partner carries insurance to protect against security breaches, ensure you are an additional insured and ask for a certificate of insurance annually. Ensure your indemnification section fully covers any breach of security obligations, and consider excluding these from your limitation of liability to the greatest extent possible.

Last week I was fortunate to have the opportunity to join Deirdre Patten in presenting a Thomson Reuters webinar on “Narrowing the Knowledge Gap in Compliance Training.” We reviewed the why and when of compliance training, shared ideas for maximizing retention of valuable information through refresher and opportunistic training, and discussed ways to build a strong culture of compliance as part of an effective compliance program. The webcast is available for free through Thomson Reuters by clicking here.

I recently had the privilege of being interviewed by Leona Lewis for ComplyEthic‘s “Masters of Disaster” podcast series, on the benefits of a “compliance by design” approach to manage risk without slowing down the business. Building strong relationships within the organization is one of the critical keys to a strong and effective compliance program. You can listen to the podcast by clicking here.